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Want to Increase Public School Funding? Try School Choice

“We need to fully fund our school formula” has become a common refrain in statehouses across the country—including in Mississippi. There is a way policymakers can increase funds for public school students—and it’s as easy as E-S-A.

The Great Recession left many states unable to appropriate enough money to fund public schools at the per-student levels recommended by their official school funding formula. With the steady, but still too slow, economic recovery experienced since 2012, pressure to bring public school funding back up to the school formula’s prescribed levels has intensified.

Meanwhile, serious efforts are underway in Mississippi to give funds directly to parents of children with special needs to choose private schools and services—which some argue only drains funds from the public system at a time when it needs more.

The opposition to that program argues that any new appropriation for ESAs will make it that much harder for the state to fully fund its school formula (the Mississippi Adequate Education Program (MAEP)).

But ESAs won’t hurt the MAEP—actually they ease the financial pressure on public schools. Here’s why:

Public schools in Mississippi are currently spending about $12,000 per year—from all funding sources state, local, and federal—on “Instruction & Other Student Expenditures” for each special needs student. To be clear, that does not include about $3,000 per student of spending for debt service, other capital costs, student transport, food service, school maintenance, security, or administrative overhead. In other words, the $12,000 amount is a pretty good proxy for the “variable” costs per public school student with special needs. Because federal funds typically cover only about 5 percent to 10 percent of the total variable costs for those students, under a best case assumption, 90 percent of those costs must be covered by state and local funds—about $10,800 per special needs student in Mississippi.

The ESA proposal, advanced during the 2014 legislative session, proposed setting aside $6,000 per student in a special account for Mississippi parents that chose to withdraw their children from their local public schools and seek a private alternative. So, to be clear: In public schools, about $10,800 in state and local public funds is spent annually on each child with special needs. Under the ESA proposal, parents can opt for $6,000 in state public funds to voluntarily withdraw their children from the public school system and use a different option.

Obviously, giving a family a $6,000 ESA benefit costs less in public funds than sending $10,800 to a public school to educate the same child.

However, the Mississippi ESA proposal does include one small exception to the requirement that eligible students must be previously enrolled in public school which slightly complicates the saving analysis. It also extended eligibility to any students with disabilities who had never been enrolled in school in Mississippi. In other words, to be more inclusive, the bill would allow students with special needs entering kindergarten or moving into Mississippi to participate as well.

Critically, ESAs undoubtedly do no harm to public school funding and add boundless opportunities for students with special needs.

What that means fiscally is that a few ESAs could be awarded to families of students that would have never enrolled in a public school in the first place. Thus, providing ESA funds to those families would be a true additional public cost.

Although we can never know with certainty if or how many ESA participants would have never gone to a public school anyway, we can make a pretty good (and cautious) estimation: Historically, only about 8 percent of K-12 students in Mississippi have been enrolled in private schools—without any assistance from public funds. We also should presume the private school enrollment rate for students with special needs to be about half the overall average rate (or about 4 percent) because:

private schools are not required to serve special needs students, and

tuition costs at private schools serving students with special needs are typically higher, and

public schools receive more dedicated funding specifically to provide extra services to these students and their families.

This is where the math starts to get just a little tricky, so follow along:

According to data from the Mississippi Department of Education (MDE), about 20 percent of all special needs students are ages five or six. That is the bulk of the ESA-eligible incoming kindergartners who are exempt from having to attend a public school first. Combining the historic 4 percent private school enrollment rate and the 20 percent share of ESA-eligible students exempt from the “prior public school enrollment” requirement reveals that less than one in 100 ESA awards would likely to go to a parent not relying on those funds to divert their child from the public school system.

20% x 4% = 0.8% (or <1%)

Applying this standard, for each 100 families awarded a $6,000 ESA, $469,200 in state and local funds would be saved. Here’s the math:

Fiscal Impact of 100 ESA Awards on State and Local Education Funds in Mississippi

Number of ESA Students

100

Number of ESA Students Diverted from Public Schools

99

Number of ESA Students NOT Diverted from Public Schools

1

Reduced Cost of 99 Students for Public Schools @ $10,800 each

$1,069,200

Additional cost of 100 ESA Awards @ $6,000 each

-$600,000

Net State/Local Funds Savings from 100 ESA Awards

$469,200

So how does that affect the Mississippi debate over fully funding MAEP versus funding a new ESA program? It means funding the proposed ESA program not only won’t make it more difficult to fully fund MAEP, it has the exact opposite effect.

The MAEP per-student funding target includes both state and local funding. Using the illustrative example above, for every 100 new ESAs awarded, 99 students would be diverted from public schools and removed from the MAEP funding calculation. Therefore, without appropriating even one more cent of state or local funds to public schools, funding 100 new ESAs and diverting 99 students with special needs away from public schools would leave behind nearly $470,000 to divvy up among the remaining 490,000 public school students…pushing up their per-student MAEP funding by nearly $1 each.

Full-funding advocates certainly would like more, and that’s understandable. But, critically, ESAs undoubtedly do no harm to public school funding and add boundless opportunities for students with special needs.

Director, Tennessee Fiscal Review Committee

Jeff Spalding previously served as the director of fiscal policy and analysis at the Friedman Foundation for Educational Choice. He currently serves as Controller for the City of Noblesville in Indiana.